CHAIRMAN OF THE BOARD OF INLAND REVENUE VS JOSEPH REZCALLAH & SONS LTD
(1962) LCN/0960(SC)
In the Supreme Court of Nigeria
January 4, 1962
Case Number: : FSC. 304/1961
JUSTICES:
UNSWORTH,FEDERAL JUSTICE
TAYLOR FEDERAL JUSTICE
BAIRAMIAN FEDERAL JUSTICE
APPELLANTS
CHAIRMAN OF THE BOARD OF INLAND REVENUE
FEDERAL BOARD OF INLAND REVENUE
RESPONDENTS
JOSEPH REZCALLAH & SONS LTD
RATIO
NOTICE OF WRITING BY THE BOARD
“…It is, therefore, a condition precedent that the Board must give the person the notice in writing specified in section 47(1) (Section 45(1), 1948 Ed.)…” Per UNSWORTH F.J.
JUDGEMENT UNSWORTH, F.J
This is an appeal from a decision of the High Court of the Northern Region of Nigeria dismissing a claim by the chairman of the Board of Inland Revenue for a sum of £2,520, being income tax and penalties for the years of assessment 1958-59 and 1959-60. The reason for the decision was that the two assessments upon which the claim was based were not made in accordance with law because:-
(a) In neither case did the plaintiff prove that the defendants were given notice requiring them, within the period limited by the notice, to deliver a return of income:
(b) The Chief Inspector of Taxes did not exercise his discretion to the best of his judgment in making the assessment under section 53(3) (section 55(3) of the revised edition) of the Income Tax Act.
The appellant appealed to this Court and filed and argued the following grounds of appeal:
(a) The learned trial Judge erred in Law in holding that the merit and/or legality of the assessments were matter which could be raised in a proceeding for recovery of the tax in the High Court.
(b) The learned trial Judge erred in law in the following passage of his judgment:
‘Accordingly I do not agree with the submission of Counsel for the plaintiff that it is entirely irrelevant how the Chief Inspector made the assessments under section 55(3) because if he did not exercise his discretion properly it follows that he did not make the assessments in accordance with law, and this claim, which is based upon those assessments, must fail’.
(c) That the learned trial Judge erred in law in that as there was no objection against the assessment and no appeal to the Appeal Commissioners on the assessment the amount of tax assessed (notwithstanding an omission to prove the service of a Return) became an absolute and conclusive debt due to the Government of Nigeria.
Counsel for the appellant, at the opening of the appeal, applied for the title of the case to be altered to the ‘Federal Board of Inland Revenue’ and this was not opposed by Counsel for the respondents. We granted this application in the exercise of our powers under section 22 of the federal Supreme Court Ordinance.
Council for the appellant then applied for leave to produce the assessments as additional evidence, and in so doing, asked the Court to waive the requirement of notice. This application was opposed by Counsel for the respondents. In reply to the court, Counsel for the appellant agreed that the evidence could have been adduced before the High Court. We did not grant this application and counsel for the appellant then withdrew an application for leave to argue additional grounds of appeal.
Counsel for the appellant said that the facts found by the trial Judge were not in dispute. The issue before us was whether the trial Judge was entitled to consider the validity of the assessment, having regard to the fact that the special procedure for appealing against an assessment had not been followed.
It is convenient at this stage to refer to the sections of the Income Tax Act which will be mentioned in this judgment. The Act is now contained in a revised edition of the Laws, and Counsel agreed that the provisions in this edition are the same as those in the old edition, which was referred to by the trial Judge, subject only to amendments which apply to both editions. I will therefore refer to the sections in the old edition, but insert after each section number the corresponding section number in the revised edition. Section 45 (47 revised) provides that every person chargeable with tax for any year of assessment, when required to do so by any notice in writing given by the Board in pursuance of the Act, shall, within the period limited by such notice, in the form of return containing such notice, prepare and deliver to the Board a true and correct statement in writing containing the particulars specified in the section. Section 53 (55 revised) provides in subsection (1) that the Board shall proceed to assess every person chargeable with the tax as soon as may be after the expiration of the time allowed to such person. The procedure for assessing a person after the expiration of that time is set out in subsections (2) and (3) of that section. Sections 59 and 60 (61 and 62 revised) provide for an appeal against an assessment to the appropriate appeal commissioners. There is a further appeal to the High Court except in cases in which the amount of tax assessed does not exceed £100. Section 61 (63 revised) provides that where no valid objection or appeal has been lodged within the prescribed times against an assessment as regards the amount of the chargeable income the assessment shall be final and conclusive for all purposes of the Act as regards the amount of such income.
Council for the appellant submitted that the Court had no inherent jurisdiction to declare the assessment invalid in the proceedings for the recovery of the tax. He said that if a statute creates new rights and duties and appoints a specific tribunal to decide disputes on matters under the statute, then the ordinary courts are not vested with any inherent jurisdiction to inquire into those matters: recourse must be had to that specific tribunal alone and this is particularly so where a right of appeal from the tribunal is still allowed to the aggrieved parties. Counsel submitted that the prescribed procedure was contained in section 59 (61revised) and 60 (62 revised) of the Act, and that the combined effect of these sections and section 61 (63 revised) is that as assessment to which there had been no objection and no appeal, becomes final and conclusive not only as to the amount of the tax in that assessment, but for all purposes of the Income Tax Act, and such assessment cannot be challenged in a suit in the High Court for the recovery of the tax so assessed. In support of this submission he referred to the case of Inland Revenue Commissioners v. Pearlberg, (1953) 1 A.E.R. 388, as page 389, and to the Nigerian case of Commissioner of Income Tax v. Rewance, (Lagos Court Suit No. 511/1952 and W.A.C.A. 127/1954). He also, very properly, drew our attention to the Privy Council decision in Mandavia v. Commissioner of Income Tax. (P,C, Appeal No.7 of 1957). Counsel also, in the course of argument raised two further matters, to which I will refer later in this judgment.
Counsel for the respondent agreed that the special procedure extension of time under the proviso to section 57(2) (59 revised) of the Act should have been granted, and, in respect of the 1959-60 tax, the taxpayer was entitled to assume that it had been granted. Counsel submitted that the assessments were not conclusive and referred to the cases of R. v. Bloomsbury Income Tax Commissioners, (1915) 3 K.B. 768, Commissioners of Taxation v, Mooney, (1907) A.C. 342 (at page 350), and St. Lucia Usines and Estates Co. Ltd. v. St Lucia (Colonial Treasurer), (1924) A.C. 508.
This issue in this case is an important one, but it is nevertheless a straightforward one, and was clearly put before us in the very able submission of Counsel for the Board of Inland Revenue. The issue is whether the special procedure for appealing against an assessment is conclusive so as to deprive the High Court of jurisdiction to inquire into the validity of the assessment in this claim to recover the tax alleged to be due. The High Court of the Northern Region of Nigeria is established by section 49 of the Constitution of Northern Nigeria and subsection (3) of that section provides that the court shall be a superior court of Record, and ‘save as otherwise provided by any Law in force in the Region, shall have all the powers of such a Court’. There can be no doubt that the High Court must have jurisdiction to inquire into the validity of an assessment on a claim for tax alleged to be due unless the legislature has otherwise provided. It is therefore necessary to examine the provisions of the Income Tax Act in order to ascertain whether this power of the Court has been taken away. Sections 59 and 60 (61 and 62 revised) provide a special procedure for disputing an assessment, but the sections do not say that this procedure is exclusive, In my view the relevant section is section 61 (68 revised), which sets out the extent to which an assessment is conclusive. The section in the revised edition reads as follows:-
63. Where no valid objection or appeal has been lodged within the time limited by section 59, 61 or 62, as the case may be, against an assessment as regards the amount of the chargeable income assessed thereby, or where the amount of the chargeable income has been agreed to under subsection (4) of section 59, or where the amount of such chargeable income has been determined on objection, revision, under the proviso to subsection (4) of section 59, or appeal, the assessment as made, agreed to, revised or determined on appeal, as the case may be, shall be final and conclusive for all purposes of this Act as regards the amount of such chargeable income; and if the full amount of the tax in respect of any such final and conclusive assessment is not paid within the appropriate period or periods prescribed in this Act, the provisions thereof relating to the recovery of tax, and to any penalty under section 67, shall apply to the collection and recovery thereof subject only to the set-off of the amount of any tax repayable under any claim, made under any provisions of this Act, which has been agreed to by the Board or determined on any appeal against a refusal to admit any such claim:
Provided that-
(a) where an assessment has become final and conclusive any tax overpaid shall be repaid;
(b) nothing in section 59 or in Part XII shall prevent the Board from making any assessment or additional assessment for any year of assessment which does not involve reopening any issue, on the same facts which has been determined, for that year of assessment, under subsection (4) of section 59 by agreement or otherwise or on appeal.
It will be noted that the section provides that the assessment is final, as regards the amount of the chargeable income. In my view however, it is not conclusive as to other matters, and the Court in subsequent proceedings can inquire into the validity of the assessment except in so far as it is restricted by section 58 (section 60 revised), which is not relevant to he matters inquired into by the High Court in this case. This view is supported by the fact that section 60(61) (62 revised) provides that there is no appeal to the High court under the special procedure where an assessment does not exceed £100 and, if the assessment by conclusive as to validity, a person assessed at £100 or less would have no recourse to the Courts to dispute the validity of the assessment.
In reaching the above conclusion I have not been unmindful of the fact that a point of law involving validity might be dealt with on appeal to the High Court under the special procedure. It is true that under those circumstances the matter could not be raised again before the High Court on a claim for the recovery of the tax, but the explanation for this is the law of estoppel and not any provision of the Income Tax Act restricting the power of the High Court to inquire into the validity of an assessment.
It was also submitted in the course of argument by the appellant that the trial Judge was wrong in holding that the assessment was made under section 53 (section 55 revised) as the assessment was made under the Income Tax Act generally and not under any particular section. I do not think that there is substance in this argument. The assessment must be made under some section and it is clear that the appellants case in the High Court was that it was under section 53 (55 revised). Counsel for the present appellant in that Court, in opening his case, is recorded at page 12 of the Record as saying:
Power to assess is contained in section 53(3) of Cap. 92 where no return has been made.
It was further submitted in the course of argument that the fact that no return was made does not prevent an assessment, but this is not the issue here. The finding of the trial Judge in this case was that it had not been established that there had been any demand for a return, which is a very different matter. The trial Judge put the matter in this way:-
In my opinion the Board cannot lawfully assess any person to tax under either subsection until after the expiration of the time allowed to such person for delivery of the return provided for in section 47’. It is, therefore, a condition precedent that the Board must give the person the notice in writing specified in section 47( 1) (Section 45(1), 1948 Ed.).
I have found the cases mentioned by Counsel helpful in considering the general principles involved, but it is to the wording of the Nigerian Act that I have looked in deciding that the High Court has not been deprived of its jurisdiction to consider the validity of an assessment on a claim for the recovery of tax alleged to be due. I will refer briet1y to the three cases on this point cited by Counsel for the appellant. The case of the Inland Revenue Commissioners v. Pearlberg related to the wording of the United Kingdom Finance and Income Tax Acts and the wording of these Acts differ from the Nigerian Laws under consideration here. It is clear from the judgment of the High Court in the case of Commissioner of Income Tax v. Rewance that there had been a demand for tax in that case and the comments of the trial Judge on the question of the special procedure appears to have been unnecessary for the purpose of deciding that the amount of tax claimed was due. The case went to the Federal Supreme Court but there is nothing to show the grounds of appeal that were argued before the Court. The Court dismissed the appeal in a judgment in which they said that there was not substance in the appeal. I do not regard this as a conclusive decision of the Federal Supreme Court on the issue which we are now considering. The decision of the Judicial Committee in the case of Mandavia v. Commissioner income Tax is to the effect that under the Kenya Income Tax Law an assessment made before the expiration of the time allowed for making a return is invalid. It would appear from the judgment that the case reached the Judicial Committee through some special procedure under the Kenya Income Tax Ordinance, but there was no decision of the Judicial Committee on whether that procedure was exclusive.
Councel for the appellant made a final submission that, if the Court was against him, dismissal of the claim should be altered to one of non-suit.
The relevant part of the judgment in the High Court reads as follows:-
For reasons which I have given I rind that the assessments upon which this claim is brought were not made in accordance with law and the claim therefore fails.
I enter judgment for the defendants.
I think that the proper course is to alter the finding of the Court below to a specific finding that ‘the assessment for 1958-59 made on the 11th November, 1958, and that for 1959-60 made on the 3rd October, 1959, were null and void, and that the claim in respect of those purported assessments accordingly fails. The invalid assessments are set aside.’
Subject to the above alterations in the finding s I would dismiss this appeal with costs assessed at £15-I5s-0d plus the cost of the record if the respondent paid for a copy.
TAYLOR, F.J
I concur.
BAIRAMIAN, FJ
I agree, and should like to add my views on this important appeal.
It is common ground that the defendants were not asked to deliver a return of income; that they were assessed and given notice of assessment; and that they did not object or appeal.
The point made on behalf of the Board is that it was not competent to the defendants to make any defence, or the High Court to inquire into anything connected with the assessments; on the ground that they were not objected to or appealed from in the manner laid down in sections 59, 61 and 62. It is the Boards contention that the assessments become final and conclusive under section 63, and that the Court was bound, under section 69, to give judgment for the amount of tax stated in the certificate of the Board.
The Act authorises the Board to assess, without requiring a return, a person who comes within section 25, viz. whose income docs not exceed £150. In other cases section 47 provides that a person shall first be asked to make a return within a specified time.
Section 55 provides that:-
(1) The Board shall proceed to assess every person chargeable with the tax as soon as may be after the expiration of the time allowed to such person for the delivery of the return provided for in section 47.
(2) Where a person has delivered a return the Board may-
(a) accept the return and make an assessment accordingly;
(b) refuse to accept the return and, to the best of his judgment, determine the amount of the chargeable income of the person and make an assessment accordingly.
(3) Where a person has not delivered a return and the Board is of the opinion that such person is liable to pay tax, he may, according to the best of his judgment, determine amount of the chargeable income of such person and make an assessment accordingly, but such assessment shall not affect any liability otherwise incurred by such person by reason of his failure or neglect to deliver a return.
(The ‘he may’ and ‘his judgment’ should perhaps read ‘the Board may’ and ‘the Boards judgment’.)
Section 55 presupposes that the person has been asked to deliver a return within a certain time, before he is assessed; if he has been asked, he may he assessed after that time has passed, even though he has not delivered a return. The request to render a return is a condition precedent to assessment; the waiting for the time allowed in the request to pass is also a condition precedent both conditions are intended to protect a person by affording him an opportunity of stating his income and other relevant matters; and an assessment which does not fulfil either of those conditions is made without jurisdiction, and is null and void.
If those conditions are fulfilled, the assessment is valid, and may be reviewed and revised on objection under section 59, followed by appeal to the Appeal Commissioners, and from them to the High Court, and on to the Federal Supreme Court, subject to certain limitations, under section 61 and 62, and at the end of the story the assessment, pursuant to section 63:-
‘Shall be the final and conclusive for all purposes of this act as regards the amount of such chargeable income.
Section 59 does not seem to me to contemplate an objection that the assessment was made without jurisdiction. Section 59 (2) begins thus:-
If any person other than an individual assessed under section 25 disputes the assessment he may apply to the Board, by notice of objection in writing, to review and to revise the assessment, made upon him.
Subsection (4) of section 59 provides that:-
In the event of any person assessed, who has objected to an assessment made upon him, agreeing with the Board as to the amount at which he is liable to be assessed, the assessment shall be amended accordingly and notice of the tax payable shall be served upon such person: provided that if any applicant for revision under the provisions of subsection (2) fails to agree with the Board the amount at which he is liable to be assessed, the Board shall give him notice of refusal to amend the assessment. etc.
From the above it appears that the aim of an objection is to reduce the amount of tax; it is not to have the assessment quashed as being ultra vires. Section 59 presupposes in my view that the assessment was made with jurisdiction under section 55, and relates to correcting the amount only the Board is not empowered to quash the assessment as being ultra vires.
Section 62(1) provides for an appeal to the Appeal Commissioners when the person taxed, in the words of that subsection, ‘has failed to agree with the Board in the manner provided in subsection (4) of section 59’. That again indicates that the appeal is on the amount of the tax, and relates to accounts, on the presupposition that the assessment is ultra vires. That becomes evident in subsection (16) of section 62, which provides that:-
Where the tax payable in accordance with a decision of Appeal Commissioners does not exceed one hundred pounds, no appeal shall lie from that decision under the provisions of section 61.
Where an appeal lies, the High Court is bound to dismiss it under subsection 19(a) if the Appeal Commissioners record in their decision under subsection (18), that:-
(a) no accounts, books or records relating to such gains or profits (viz. those of a trade, business, profession or vocation) were produced by or on behalf of the appellant.
After the decision of the High Court, the appellant may go to the Federal Supreme Court if the High Court decided that the proper amount of tax is £150 or more.
Finally, there is section 63, which makes the assessment final and conclusive as regards the amount of chargeable income, and the tax becomes recoverable by suit under section 69, upon a certificate of the Board.
It appears that sections 59, 61 and 62, on objections and appeal, were intended to provide a method for having an assessment reviewed and revised, on the presupposition that the assessment was made with jurisdiction: they do not in my view contemplate a case where it was made without jurisdiction. Suppose, for example, that a person is assessed by the Board to pay £90 without having been asked to deliver a return. If he complains to the Board that the assessment was illegal, and the Board does not accede to his complaint, he can go to the Appeal Commissioners, but if they also refuse to listen, there the matter ends. On the argument for the Board, when he is sued under section 69, he cannot advance the defence that the assessment was ultra vires but the court must give judgment ordering him to pay the tax assessed although it was assessed without jurisdiction and illegal. That is an absurd result, which must be wrong.
He must have a remedy against an illegal assessment. It may be that he can sue the board for a declaration that the assessment was illegal; but I can see no reason why he should not wait until he is sued by the Board and then make his defence. The Board cannot take shelter under section 60 of the Act, for that section saves an assessment from attack on the grounds of mistake, defect or omission ‘if the same is in substance and effect in conformity with or according to the intent and meaning of this Ordinance’: it does not save it from attack on the ground that it was made without jurisdiction.
I am alive to the provision in section 63 that an assessment becomes final and conclusive as to the amount of the chargeable income. I think that presupposes that it was made with jurisdiction; for if it was null and void ab initio, it must remain null and void. The St. Lucia Usines and Estates Co. Ltd. v. St. Lucia (Colonial Treasurer), (1924) A.C. 508, is not on all fours with this case; hut what was held further there, in the last paragraph but one on p.513, seems to me to lend support to the view I have taken.
There it was said:-
Inasmuch as in their Lordships judgment the company was in the year 1921 not assessable at all, it was not a person ‘required by the Ordinance to make and deliver a return’, but was outside the Ordinance altogether, and action taken under the Ordinance cannot result in anything ‘final and conclusive’ against the Company.
Here I would say that, as the assessments were made outside the provisions of the Act, they could not result in anything final and conclusive against the defendants.
Mr Baloguns argument is that, as the Act provides a procedure in sections 59, 61 and 62, for questioning an assessment, that is the only procedure available to a person who is assessed. It does not distinguish between:-
(a) the case of a person who is assessed with jurisdiction, and
(b) the case of a person who is assessed without jurisdiction.
It can produce injustice: for there is no provision in section 62 enabling the Appeal Commissioners to refer a point of law to the High Court. I am therefore in no doubt that his argument goes too far.
He has been very helpful indeed: he has supplied us with copies of the judgment given by Evelyn Brow,. Ag. J., in Commissioner of Income Tax v. A.O. Rewane to the West African Court of Appeal given on 15th May, 1955; and of the judgment of the Privy Council in P.C. Appeal No.7 of 1957 in Mandavia v. Commissioner of Income Tax on appeal from East Africa given on the 1st December, 1958. The Privy Council judgment is, if I may say so, illuminating. He has conceded that it is against him, but submitted that it is only of persuasive force; and he has argued that we are bound to follow the decision in Rewane, which is a Nigeria case.
A judgment is of value for the principle of law which it applies to the facts of the case which it decides. All that the W.A.C.A. judgment says is this:-
There is absolutely no merit in this appeal which appears to have been brought under a misconception. The appeal is accordingly dismissed with costs fixed at £14-14s-0d.
Doubtless that was all that was needed in Rewanes appeal; but it cannot he cited as an authority for any principle of law. As regards the judgment at first instance in that case, its meaning is not, I must confess, clear to me; if it means that there can be an assessment even though no request for a return had been made, then ( I must respectfully disagree; but I doubt whether it means that.
Mr Balogun has asked that, in the event of our refusing to give judgment for the Board, the Board should be non-suited. As the assessments were null and void from the start, the proper course is to set them aside, as was done by the Privy Council in Mandavias appeal. The judgment of Reed, J., ends thus:-
For reasons I have given I find that the assessments upon which this claim is brought were not made in accordance with law and the claim therefore fails. I enter judgment for the defendants.
It should, in my view, be varied to read thus:-
The assessment for 1958-59 made on the 11th November, 1958, and that for 1959-60 made on the 3rd October, 1959, were made without jurisdiction, and being ultra vires, null and void, are set aside; the suit is dismissed with costs to the defendants.
I agree that this appeal should be dismissed, with an order as proposed by the learned presiding Judge of this Court.
Appeal dismissed.
